FICO - Your Credit Score
Since we live in an automated, it should come as no surprise that your ability to repay virtually any loan comes down to a single number.
The FICO score is built by credit agencies. These agencies use the payment history from all of your loans: credit cards, mortgages, car loans etcetera.
The three reporting agencies use slightly different formulas to build a credit score. The original FICO was developed by Fair Isaac and Company.
While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While the formulas vary, each agency uses the following to build your credit score:
- Your Credit History - How long have you had credit?
- History of Payments - Do you have any payments later than 30 days?
- Your Credit Card Balances - How many accounts do you have? How much do you owe on your accounts?
- Credit Inquiries - How many times have you had your credit checked for a loan?
These factors are weighted a little bit differently depending on the formula being used. The results are added up and distilled into a single number. Credit scores range from 300 to 800. Higher is better. Most home buyers will likely find their scores falling between 620 and 800.
Your score affects your monthly payment
Did you know? FICO scores affect more than your ability to get a loan. They also affect your interest rate. Lenders give lower interest rates to individuals with higher scores.
Can I raise my credit score?
Unfortunately, there isn't a lot you can do to immediately improve your credit score. Since the score is entirely based on your lifelong credit history, it's hard to make a significant change in the score with quick fixes. (Of course you can and should appeal incorrect items on your credit report.)
How do I find out my FICO score?
To improve your credit score, you must have the credit reports that the agencies use to build it. Of course, you need the score as well. Fair Isaac, the corporation that invented the first FICO credit score, offers FICO scores on its website: myFICO.com. It's inexpensive, fast, and easy to get your credit score along with credit reports from all three credit reporting agencies. They also provide helpful information and online tools that can help you understand how to improve your FICO score.
You can get a free credit report every year from all three agencies by visiting AnnualCreditReport.com. You won't get a free credit score from AnnualCreditReport.com, but getting one is quick and very inexpensive.
Armed with this information, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Want to know more about your credit score? Give us a call: 6307173600.